Mainline produce corporation acquired all the outstanding common stock of iceberg lettuce corporation for $38,000,000 in cash. the book values and fair values of iceberg’s assets and liabilities were as follows: - book value fair value current assets $ 11,000,000 $ 14,000,000 property, plant, and equipment 30,000,000 36,000,000 other assets 3,000,000 4,000,000 current liabilities 7,400,000 7,400,000 long-term liabilities 12,600,000 11,600,000 required: calculate the amount paid for goodwill. (enter your answer in millions (i. e. 5,000,000 should be entered as

If Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $38,000,000 in cash. The book values and fair values of Iceberg’s assets and liabilities  the amount paid for goodwill will be: $14,000,000

First step is to determine the net fair value of asset acquired

Current asset                               $11,000,000

Property, plant, and equipment    $30,000,000

Other asset                                   $3,000,000  

Less; Current liabilities                 ($7,400,000)  

Less: Long term liabilities            ($12,600,000)  

Net fair value of asset acquired $24,000,000

Now let determine the Goodwill using this formula

Goodwill=Cash paid-Net fair value of asset acquired

Let plug in the formula

Goodwill=$38,000,000-$24,000,000

Goodwill=$14,000,000

Inconclusion if Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $38,000,000 in cash. The book values and fair values of Iceberg’s assets and liabilities  the amount paid for goodwill will be: $14,000,000

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The amount paid for goodwill is $3,000,000

Explanation:

For computing the goodwill amount, first we have to find out the net assets value based on fair values which is shown below:

Net asset = Total assets - Total liabilities

where,

Total assets = Current assets + Property, plant, and equipment + Other assets

= $14,000,000 + $36,000,000 + $4,000,000

= $54,000,000

And, the total liabilities = Current liabilities + Long-term liabilities

                                      = $7,400,000 + $11,600,000

                                      = $19,000,000

Now put these values to the above formula

So, the value would be equal to

= $54,000,000 - $19,000,000

= $38,000,000

Now the goodwill would be

= Amount paid - Net assets

= $38,000,000 - $35,000,000

= $3,000,000

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